Final Results
CRH PLC
04 March 2008
RECORD 2007 RESULTS - 15 CONSECUTIVE YEARS OF GROWTH
Year ended 31st December 2007 2006 % change
euro m euro m
Revenue 20,992 18,737 + 12%
EBITDA* 2,860 2,456 + 16%
Operating profit* 2,086 1,767 + 18%
Profit on disposal of fixed assets 57 40 + 43%
Profit before tax 1,904 1,602 + 19%
euro cent euro cent
Earnings per share 262.7 224.3 + 17%
Cash earnings per share 404.9 352.1 + 15%
Dividend 68 52 + 31%
* EBITDA and operating profit are stated before profit on disposal of fixed
assets.
• CRH has delivered another very strong performance in 2007 with full year
profit before tax of euro 1,904 million, a 19% increase on 2006 (euro 1,602
million). Earnings per share increased 17% to 262.7c (2006: 224.3c). This
represents CRH's 15th consecutive year of profit and earnings growth.
• Operating profit in our Europe businesses grew euro 292 million to euro
1,106 million, up 36%. Organic growth, which accounted for euro 178 million or
61% of the increase, was more than double 2006 organic growth of euro 81
million.
• Operating profit for the Americas operations increased by euro 27 million to
euro 980 million, up 3%. Robust organic performances in our Materials and
Products activities plus an excellent contribution from APAC were offset by
lower profits in Distribution and a euro 78 million impact due to a weaker US$.
• Overall operating profit margin increased to 9.9% (2006: 9.4%)
• Profit on disposal of fixed assets at euro 57 million was ahead of 2006
(euro 40 million). It is anticipated that a strong level of profit on disposals
will be an ongoing feature of the Group's activities.
• Expenditure on acquisitions and investments during 2007 totalled a record
euro 2.2 billion. Nevertheless, EBITDA/net interest cover remained high at 9.4
times for the year (2006: 9.7 times), well above the Group's comfort level of
approximately 6 times.
• The proposed 31% total dividend increase for 2007 makes this the 24th
consecutive year of dividend growth, and follows a 33% increase in 2006
reflecting the phased adjustment in dividend cover from 4.8 times in 2005 to a
target of 3.5 times for 2008.
• In January CRH announced a share repurchase programme of up to 5% of the 547
million shares then in issue. A total of approximately 6 million shares have
been repurchased during January and February 2008 at an average price of euro 25
per share.
• CRH remains committed to optimising the use of its balance sheet while
maintaining an investment grade credit rating.
Liam O'Mahony, Chief Executive, said today:
'CRH's geographic,sectoral and product balance continued to deliver in 2007 both
in terms of overall trading performance and acquisition activity. While
developments over recent months have added to economic uncertainties, CRH is
well positioned across its operations to deal with the evolving market
circumstances. Following record levels of acquisition activity in 2006 and 2007,
and with an ongoing strong pipeline of opportunities, we are continuing to
develop our Western European and North American businesses while building on our
growing platforms in emerging markets. With a relentless emphasis on operational
efficiency, and targeted cost reduction measures, we remain focused on our twin
goals - performance and growth - and on delivering a sixteenth consecutive year
of profit and earnings growth in 2008.'
Announced Tuesday, 4th March 2008
This Results Announcement contains certain forward-looking statements as defined
under US legislation. By their nature, such statements involve uncertainty; as a
consequence, actual results and developments may differ from those expressed in
or implied by such statements depending on a variety of factors including the
specific factors identified in this statement and other factors discussed in our
Annual Report on Form 20-F filed with the SEC.
Contact CRH at Dublin 404 1000 (+353 1 404 1000)
Liam O'Mahony Chief Executive
Myles Lee Finance Director
Eimear O'Flynn Head of Investor Relations
Maeve Carton Group Controller
CRH plc, Belgard Castle , Clondalkin, Dublin 22, Ireland TELEPHONE
+353.1.4041000 FAX +353.1.4041007
E-MAIL mail@crh.com WEBSITE www.crh.com Registered Office, 42 Fitzwilliam Square
, Dublin 2, Ireland
RESULTS
HIGHLIGHTS
CRH has delivered another very strong performance in 2007 with full year profit
before tax of euro 1,904 million giving a 19% increase on 2006 (euro 1,602
million). This represents CRH's fifteenth consecutive year of profit and
earnings growth.
The results include the proportionate consolidation of joint ventures in the
Group's income statement, cash flow statement and balance sheet, while the
Group's share of profit after tax of associates is included as a single line
item in arriving at Group profit before tax.
• Sales revenue: euro 20,992 million, up 12%
• EBITDA*: euro 2,860 million, up 16%
• Operating profit*: euro 2,086 million, up 18%
• Profit on disposal of fixed assets: euro 57 million, up 43%
• Profit before tax: euro 1,904 million, up 19%
• Basic earnings per share: 262.7c, up 17%
• Cash earnings per share: 404.9c, up 15%
• Dividend per share: 68c, up 31%
*EBITDA (earnings before interest, tax, depreciation and amortisation) and
operating profit do not include profit on disposal of fixed assets
The average US $/euro rate of 1.3705 for 2007 was 8% weaker versus the euro than
in 2006 (1.2556). This, combined with movements in average rates for the Group's
other operating currencies, had a negative impact of euro 67 million on profit
before tax.
Note 3 on page 15 analyses the key components of 2007 performance.
DIVIDEND
The Board is recommending a final dividend of 48c per share, an increase of 25%
on the 2006 final dividend of 38.5c. This gives a total dividend for the year of
68c, an increase of 31%, representing the twenty-fourth consecutive year of
dividend growth. It is proposed to pay the final dividend on 12th May 2008 to
shareholders registered at the close of business on 14th March 2008.
The 31% 2007 total dividend increase follows a 33% increase in 2006 and reflects
the second step in a phased reduction in dividend cover which aims to achieve
dividend cover of the order of 3.5 times for the 2008 financial year. The 2007
dividend was covered 3.9 times (2006: 4.3 times and 2005: 4.8 times).
DEVELOPMENT
Total 2007 acquisition spend amounted to euro 2.2 billion, a new record for CRH.
First half highlights included the acquisition of Swiss builders merchant Getaz
Romang completed in May; the purchase of 50% of Denizli Cement in Turkey; the
buyout of the remaining 50% of Paver Systems in the US; and the acquisition of
Harbin Sanling Cement Company in China. Major second half transactions included
the August buyout of the remaining 55% of Cementbouw BV in the Netherlands;
completion of four separate transactions by Americas Materials announced in
September; and the purchase of certain Cemex assets in Florida and Arizona. In
addition CRH completed 68 other transactions across its various business
segments.
In addition during the year we commenced three major cement projects in Ireland,
Poland and Ukraine. These, combined with ongoing construction of our joint
venture cement plant in Florida, represent a total investment over three years
of approximately euro 0.7 billion targeted at modernising and expanding cement
production in three key European markets and providing CRH's first investment in
US cement.
SEGMENT REVIEW
EUROPE - MATERIALS
Analysis of change
Total Acquisitions
euro million 2007 2006 Change Organic 2006 2007 Exchange
Sales revenue 3,651 2,967 +684 +457 +24 +210 -7
% change +23% +15% +1% +7% -
Operating profit* 586 421 +165 +125 +6 +34 -
% change +39% +30% +1% +8% -
Margin 16.1% 14.2%
*Operating profit is before profit on disposal of fixed assets
Europe Materials delivered a significant increase in operating profit and margin
driven by exceptionally strong organic growth from operations in Central/Eastern
Europe.
Ireland: Although the second half saw an accelerating decline in residential
output from high levels, the National Development Plan continued to underpin
infrastructure demand, while private investment remained strong particularly in
commercial and retail projects. Agricultural construction recovered well,
supported by environmental improvement grant aid. As a result overall demand
for our products was at a similar level to 2006. Ongoing programmes to reduce
operating costs and improve efficiency delivered further savings, particularly
in the area of energy cost reduction. The emphasis on cost recovery through
price improvement continued. Operations in Northern Ireland benefited from the
strong local economy. Profits were ahead of 2006.
Finland/Baltics: Broad-based strength in Finnish construction activity
contributed to strong advances in cement, aggregates and readymixed concrete
volumes. There was a marked increase in new non-residential construction, which
grew by over 20%, while ongoing investments in infrastructure combined with a
stable residential market, also underpinned volume growth. All products achieved
improved pricing resulting in a very good uplift in Finnish operating
performance. Volumes in Estonia, Latvia and St. Petersburg were generally ahead
of 2006 and while higher input costs remained a challenge, particularly in
Russia, good cost control and better pricing held overall profits in line with
2006 levels.
Central/Eastern Europe: 2007 was an excellent year for our Polish operations
with annual cement volumes up 17% on 2006. Our concrete businesses performed
extremely well with improvement in both volumes and prices across all product
groups. Despite some delays in the road programme our aggregates and blacktop
operations performed well with a significant increase in hardrock aggregates
sales. The lime group continued to perform satisfactorily with lime products
volumes up 7%. Overall, profits in Poland improved significantly on 2006
levels. In Ukraine, GDP grew by 8% with increased demand for cement. Higher
cement pricing in Russia and other neighbouring countries had a positive effect
on pricing and profitability progressed significantly to record levels.
Switzerland: Construction activity grew by 1.4%. Growth drivers were
infrastructure and industrial construction. Start-up infrastructure projects
led to higher cement sales and strong construction activity in all the regional
markets led to better profitability in downstream ready-mixed concrete,
aggregates and asphalt operations.
Iberia: Although the Spanish economy continued to grow our volumes in Spain
were a little down on the record levels achieved in 2006. Nevertheless, better
pricing and improved cost control led to higher margins and increased
profitability. Corporacion Uniland, the Group's 26% Spanish cement associate,
recorded a strong increase in profitability. In Portugal, construction declined
by approximately 3.9%, reflecting reduced activity in housing. However, Secil's
three cement plants operated at full capacity taking advantage of strong export
markets and Secil recorded a satisfactory year supported by a good advance in
profitability in its Tunisian cement operation and in its downstream activities
in Portugal.
Eastern Mediterranean: In April CRH acquired a 50% stake in Denizli Cement, one
of three large cement producers in the Aegean region of south-western Turkey .
The performance of the business since acquisition has been in line with our
expectations and ahead of prior year results. In Israel, our 25% associate
performed slightly ahead of 2006.
EUROPE - PRODUCTS
Analysis of change
Total Acquisitions
Non-rec
euro million 2007 2006 Change Organic 2006 2007 items Exchange
Sales revenue 3,628 3,186 +442 +161 +196 +85 - -
% change +14% +5% +6% +3% - -
Operating profit* 308 221 +87 +30 +20 +6 +31 -
% change +39% +13% +9% +3% +14% -
Margin 8.5% 6.9%
Excl. non-recurring 8.5% 7.9%
*Operating profit is before profit on disposal of fixed assets
These operations delivered a strong improvement in operating profit and a good
margin advance in 2007.
Concrete Products: This group, which in 2007 accounted for approximately 50% of
Europe Products' operating profit, reported a good underlying profit advance
boosted by contributions from acquisitions. Architectural operations (pavers,
tiles and blocks) performed ahead of 2006 despite difficult conditions in
several markets. The Dutch and Belgian businesses continued to face tough
competition due to market over-capacity and downward price pressure. Operations
in Germany posted strong results despite a downturn in new residential
construction while in France results improved driven by operational synergies.
Our Danish and Slovakian businesses continued to perform strongly. Supreme in
the UK , acquired in April 2006, contributed above expectations in its first
full year. Our Structural operations (floor & wall elements, beams, vaults and
drainage products) again delivered excellent results driven by tight operational
control and strong non-residential markets in Belgium, France, Denmark and
Poland. Our sand-lime brick business posted lower results reflecting slower
activity levels in the Dutch residential market.
Clay Products: Overall the Clay Products group delivered increased profits in
2007. UK brick industry volumes showed a welcome return to growth in the first
half of 2007; however, with heavy rain across the UK in mid summer, volumes for
the year were at a similar level to 2006. Ibstock profits advanced strongly due
to operating and overhead efficiencies. In Mainland Europe our markets in the
Netherlands slowed as the year progressed and profitability declined. In Germany
the initial optimism of the first quarter was not sustained and our clay
operations were restructured; however, underlying profitability improved
significantly on 2006. Polish markets advanced strongly and profits increased
sharply as a result of good volume and price growth.
Building Products: The Building Products group is active in light-side building
materials and focuses on three core business areas: Construction Accessories,
Building Envelope Products and Insulation. Market conditions in 2007 were
positive, particularly in non-residential sectors in Germany , the Benelux and
the UK. All business units contributed to organic improvement, complemented by
acquisitions. Our Construction Accessories business, the market leader in
Europe , experienced another year of top performance and growth. The full year
contribution of Halfen, acquired May 2006, exceeded our expectations and all our
other businesses showed solid operating results. Building Envelope Products
comprises the Fencing & Security (F&S), Daylight & Ventilation (D&V) and Roller
Shutters & Awnings (RSA) businesses, which specialise in entrance control and
climate control products. All these activities contributed to a stronger 2007
performance, while the first full year contribution from our RSA business,
acquired August 2006, exceeded expectations. Insulation made further good
progress in its profit recovery programme.
EUROPE - DISTRIBUTION
Analysis of change
Total Acquisitions
Non-rec
euro million 2007 2006 Change Organic 2006 2007 items Exchange
Sales revenue 3,435 2,786 +649 +76 +25 +566 - -18
% change +23% +3% +1% +20% - -1%
Operating profit* 212 172 +40 +23 +1 +36 -19 -1
% change +23% +13% - +21% -11% -
Margin 6.2% 6.2%
Excl. non-recurring 6.2% 5.5%
*Operating profit is before profit on disposal of fixed assets
2007 was another strong year with further improvement in sales and operating
profit. Good market conditions in most of our markets, a mild winter and a
relentless focus on margin improvement and cost control, underpinned organic
growth. This was supplemented by strong contributions from the 10 acquisitions
completed in 2007, in particular from Getaz Romang in Switzerland.
Builders Merchants: Following a good final quarter in 2006, our Dutch business
performed very strongly in the first half of 2007 and demand remained solid
throughout the second half. This positive backdrop combined with a targeted '
quality for quantity' margin improvement programme enabled our business to
report strong sales and profit growth.
In France, our heritage operations in Ile de France (100%-owned), Burgundy (57%)
and Franche Comte (57%) benefited from generally good market conditions
resulting in improved sales and profits. LDP (100%), acquired in January 2007
with 17 locations in Normandy, delivered very satisfactory results and exceeded
our initial expectations.
Our acquisition (effective 1st May 2007) of Getaz Romang created the largest
builders merchants business in Switzerland with more than 100 locations and
annualised sales of approximately euro 1 billion. Organic improvement in the
heritage Baubedarf and Richner operations combined with a performance well above
initial expectations from Getaz Romang and the successful integration of all
three businesses, resulted in a highly satisfactory 2007 performance in
Switzerland.
Quester, our Austrian builders merchants company, failed to benefit in 2007 from
generally good market conditions and from re-organisation measures taken in
2006. As a result, sales, operating profit and margins declined. In response,
further restructuring initiatives were implemented from mid-year which are
expected to restore margins to appropriate levels. Taking account of these
restructuring costs, this business was loss-making at operating profit level in
2007.
In Germany, our 48% Bauking joint-venture had a good start to the year due to
mild winter weather. However, the expiry of home ownership grants and the
increase in value added tax (VAT) effective 1st January 2007 began to impact
from the second quarter. As a result, like-for-like sales were lower than in
2006. However, with relentless cost control, underlying operating profit was
similar to 2006 and, with an active year on the development front, overall sales
and operating profit advanced.
DIY: After some flat years, 2007 saw a healthy increase in the total DIY market
in the Netherlands underpinned by increasing consumer confidence. The mild
winter and sunny spring period resulted in a very successful garden season,
while good promotional campaigns and sharp formula management resulted in an
increase in market share. Organic sales and profit advanced strongly.
Operations in Belgium also showed a healthy increase in both sales and profit.
In a very competitive market, which was depressed by the effects of the VAT
increase, Bauking's DIY activities in Germany reported sales and profit in line
with 2006.
Despite generally weak economic conditions in Portugal, like-for-like sales in
our joint-venture remained at 2006 levels. Start-up costs associated with 7 new
store openings resulted in lower profits than 2006.
AMERICAS - MATERIALS
Analysis of change
Total Acquisitions
euro million 2007 2006 Change Organic 2006 2007 Exchange
Sales revenue 5,445 4,778 +667 -61 +1,002 +127 -401
% change +14% -1% +21% +2% -8%
Operating profit* 570 475 +95 +42 +80 +12 -39
% change +20% +9% +17% +2% -8%
Margin 10.5% 9.9%
Excl. APAC 12.1% 11.2%
*Operating profit is before profit on disposal of fixed assets
A strong organic performance, with continuing success in recovering higher input
costs, and a significant incremental contribution from APAC, resulted in another
record year of sales and operating profit. The reported operating margin of
10.5% again reflected the dampening effect of APAC's lower margin business mix;
however the margin excluding APAC advanced to 12.1%.
Despite record crude oil prices, bitumen costs increased by a relatively modest
5%. Energy used at our asphalt plants had a composite cost decrease of 7%. The
cost of diesel and gasoline used to power our mobile fleet rose by 6%. Against
this backdrop, overall prices increased 7% for aggregates, 8% for readymixed
concrete and 12% for asphalt. While funding for highway projects showed further
growth, with relatively fixed highway budgets, volumes were again impacted by
the strong price increases necessary to recover higher input costs. Total
volumes, including acquisitions, increased 5% for aggregates, 2% for readymixed
concrete and 14% for asphalt. Heritage volumes declined 7% for aggregates, 13%
for readymixed concrete, and 13% for asphalt.
The acquisition of APAC has resulted in changes to our regional structure. The
newly formed Mid-Atlantic region comprises operations in Pennsylvania , Delaware
and Michigan , previously part of the Central region. We have merged APAC's
operations in western N. Carolina, eastern Tennessee and Virginia into a
redefined Central region together with heritage operations in Ohio, Kentucky, W.
Virginia, N. Carolina and Virginia. A new APAC region comprises operations in
Alabama, Arkansas, Florida, Georgia, Kansas, Missouri, Mississippi, S. Carolina,
Texas, Oklahoma and W. Virginia.
New England: New Hampshire and Vermont enjoyed good trading in solid markets.
Massachusetts had another favorable year with good demand and a continuing
positive pricing environment. The states of Maine and Connecticut both reduced
highway spending and higher prices impacted volumes at the municipal and local
level resulting in profit declines.
New York/New Jersey: Our New York/New Jersey businesses had record results
mainly due to asphalt margin expansion. In Upstate New York, our Albany
operations once again increased profit. Recent years have seen significant
contraction in the Rochester region, however, 2007 brought some improvement in
demand and our operations reported higher profit.
Mid Atlantic: Despite continued poor markets in Michigan and a slowing economy
in Pennsylvania and Delaware, our operations delivered results on a par with
2006 reflecting strong cost control and benefits from price initiatives.
Central: This region delivered record results with improvements in pricing, a
winter-fill programme which mitigated significant bitumen cost increases during
the busy paving season and positive contributions from APAC operations.
West: Another excellent year with solid non-residential and highway markets
offsetting weak residential demand. Once again, Utah and Idaho saw significant
profit gains. In Washington, results improved significantly. Operations in
Wyoming, Montana, South Dakota, Colorado, and New Mexico had another record
year. However, Iowa suffered profit declines due to weak residential demand.
APAC: We achieved significant synergies through overhead reductions and by
shifting the business emphasis from construction to materials. The integration
programme was completed on schedule and overall performance was well ahead of
expectations.
AMERICAS - PRODUCTS
Analysis of change
Total Acquisitions
euro million 2007 2006 Change Organic 2006 2007 Exchange
Sales revenue 3,510 3,572 -62 -186 +226 +185 -287
% change -2% -5% +6% +5% -8%
Operating profit* 340 375 -35 -17 -1 +13 -30
% change -9% -4% - +3% -8%
Margin 9.7% 10.5%
Excl. MMI 11.0% 11.3%
*Operating profit is before profit on disposal of fixed assets
Our Products businesses in the Americas delivered a resilient performance with
continued growth in non-residential activity mitigating the impact of
residential weakness leaving full year operating profit before translation
effects only slightly below the record 2006 outcome.
Architectural Products Group (APG): APG faced difficult trading conditions in
2007 due to the sharp and continuing slowdown in the residential construction
sector and weaker demand from the homecenter channel. These negative influences
were partially offset by strong non-residential construction which limited the
decline in like-for-like sales to approximately 10%. Despite the reduction in
turnover, strong margin management, a significant turnaround in our Lawn &
Garden bagged soil and mulch activities and a strong performance from our
Canadian operations resulted in broadly maintained profits and an improved
overall operating margin compared with 2006.
Precast: The continued strength of the non-residential construction sector
during the year was offset by a very weak residential sector. However, margins
were sustained by good cost control and effective price management and profits
were only slightly behind a record 2006. Backlog volumes and margins heading
into 2008 are similar to 2007.
Glass: Trading conditions in the architectural glass market weakened in the
second half of the year, although continued demand for high-performance
energy-efficient architectural glass products and value-added fabrication
services resulted in similar like-for-like sales and operating profit. This,
combined with an excellent first-time contribution from Vistawall, a leading
vertically-integrated manufacturer of a broad range of architectural aluminium
glazing systems with annual sales of US$323 million and which was acquired in
June 2007, enabled the group to achieve a record performance in 2007.
MMI: Acquired at end-April 2006, MMI is a leading manufacturer and distributor
in three segments: fencing products, welded wire reinforcement products and
construction accessories. Sales and profitability in MMI's fencing division
declined significantly due to the dramatic fall in residential construction
activity; this also affected certain product categories in the welded wire
reinforcement division. Construction accessories performed relatively well for
the year. Strong management actions are underway to rationalise MMI's cost
structure and improve operating profit margins.
South America: Our operations in Argentina and Chile had another record year in
a robust regional economic environment. In Argentina, the recent capacity
expansion made in our ceramic tile business resulted in further strong gains in
sales and profits. Our Chilean glass business performed extremely well.
AMERICAS - DISTRIBUTION
Analysis of change
Total Acquisitions
euro million 2007 2006 Change Organic 2006 2007 Exchange
Sales revenue 1,323 1,448 -125 -209 +163 +42 -121
% change -9% -15% +11% +3% -8%
Operating profit* 70 103 -33 -39 +15 - -9
% change -32% -38% +14% - -8%
Margin 5.3% 7.1%
*Operating profit is before profit on disposal of fixed assets
Americas Distribution comprises two divisions which supply specialist contractor
groups; Roofing/Siding which accounts for approximately 53% of annualised sales
and Interior Products (wallboard, steel studs and acoustical ceiling systems)
which represents approximately 47% of annualised sales.
Roofing/Siding: Demand declined in almost all areas reflecting the downturn in
both new and remodel activity. Florida was particularly impacted due to the
absence of extensive 2006 roofing/siding repair activity which followed active
hurricane seasons in both 2004 and 2005. Hawaii and the Pacific Northwest were
the bright spots for the year.
Interior Products: This business performed well despite a generally weakening
background and significant price deflation in gypsum wallboard and, with the
benefits of good contributions from acquisition activity in recent years
particularly in Hawaii , Texas and North Carolina , profits were maintained.
Against this backdrop, full year operating profit for Americas Distribution
declined by 26% before translation effects; while down from the record 2006
level, the operating profit margin of 5.3% was resilient in the circumstances.
FINANCE
Although higher short-term interest rates and substantial acquisition activity
over the past two years resulted in a significant increase in net finance costs
to euro 303 million (2006: euro 252 million), EBITDA/net interest cover for the
year remained very comfortable at 9.4 times (2006: 9.7 times). The tax charge
at 24.5% increased compared with 2006 (23.6%).
Net debt increased by euro 671 million despite a total net spend of euro 3.25
billion on acquisitions, investments and capital projects, partly helped by a
euro 237 million favourable translation impact mainly attributable to the weaker
year-end rate for the US Dollar. Net debt at year-end amounted to euro 5,163
million (2006: euro 4,492 million).
Total equity increased by euro 916 million after taking account of an adverse
euro translation impact of euro 410 million due to the effect of the weaker US
Dollar. Total equity at year-end amounted to euro 8,020 million (2006: euro
7,104 million).
Subsequent to year-end, on 3rd January 2008, CRH announced that with a strong
financial position the Board had decided to introduce a share repurchase
programme limited to a maximum of 5% of the 547 million Ordinary Shares then in
issue. Since then approximately 6 million Ordinary Shares, representing just
over 1% of CRH's issued share capital, have been repurchased at an average price
of euro 25 and are now held as Treasury Shares.
DEVELOPMENT
Total acquisition spend in 2007 amounted to euro 2.2 billion, a record for the
Group.
Europe Materials expanded its presence in emerging markets with the acquisition
in February of a modern 650,000 tonne cement plant in Heilongjiang province in
northeast China and in April of a 50% stake in Denizli Cement, which operates an
integrated cement and ready mixed concrete business with a modern 1.8 million
tonne cement plant in the Aegean region of southwestern Turkey. In August, CRH
acquired the remaining 55% of Cementbouw BV , a major Dutch trader in cement,
fly-ash and aggregates, and a leading readymixed concrete producer in the
Netherlands , following which Cementbouw became a new reporting and development
platform within Europe Materials. These transactions, combined with eleven other
bolt-on acquisitions/investments across the platform, involved a total
investment of euro 354 million. In addition, during 2007, Europe Materials
commenced three major cement projects in Ireland, Poland and Ukraine targeted at
modernising and expanding cement production capacity in three key markets.
Europe Products continued its strong development thrust with a total investment
of euro 221 million on 16 acquisitions. The Concrete group was again very active
accounting for the bulk of the spend, with entry into the Romanian market, three
other architectural acquisitions including an add-on in the UK and two bolt-ons
to its water treatment and paving business in Belgium. The structural group
expanded its product range and market position in Denmark with the acquisition
of a concrete stairs business in March followed by the purchase of a lightweight
wall panels and flooring manufacturer in August; this group also acquired a
small add-on in France and completed the buyout of the remaining 75% of Ergon
Poland. The Clay group expanded its Polish presence with the acquisition of a
clay brick, block and roof tile manufacturer south of Poznan . Four bolt-ons to
our Construction Accessories platform were completed in the UK, France, Italy
and Norway while our Fencing & Security business completed three small deals in
the UK, France and Sweden.
Europe Distribution completed 10 acquisitions in 2007 for a total consideration
of euro 442 million. The major transaction was the acquisition in May of the
publicly-quoted Swiss builders merchant Getaz Romang. This business which has
extensive operations in the French-speaking region of Switzerland is an
excellent complementary fit with CRH's existing operations in German-speaking
Switzerland. Other significant Distribution acquisitions were the purchase in
January of a 17-branch builders merchanting business in Normandy and the
February acquisition by our German joint-venture Bauking of a leading regional
player with 16 builders merchants locations and 13 DIY stores in southern
North-Rhine-Westphalia.
With a total investment of euro 642 million (US$0.9 billion), 2007 was another
very busy development year for Americas Materials. The major elements were the
acquisition of Conrad Yelvington Distributors (CYDI) and the purchase of certain
Cemex assets in Florida and Arizona. CYDI is the largest rail distributor of
aggregates in the Southeast US and, with a major presence in Florida, is an
excellent fit with APAC's Florida activities and with our extensive Precast and
Architectural Products businesses in the region. The former Cemex assets fit
well with our interests in Florida and offer opportunities in Arizona. In
addition the Division completed 17 other transactions including significant
moves in the Western states and Pennsylvania, and the start of a bolt-on
programme across the APAC platform. Construction of the 1.1 million-tonne
joint-venture greenfield cement plant in Florida is progressing well with
completion scheduled for end-2008.
Americas Products spent a total of euro 355 million on acquisitions during 2007.
APG completed 12 acquisitions which included the purchase of concrete block
operations, masonry distribution businesses and other bolt-on acquisitions in
masonry, packaged soils and mulches, and packaged specialty concrete products.
APG also exercised its option to buy out the remaining 50% stake in Paver
Systems, a leading manufacturer of interlocking concrete pavers in Florida. The
Precast Group completed two transactions acquiring a polymer box manufacturer
with plants in California, Kentucky and Ohio and a concrete manhole producer in
Southern California. In June, the Glass Group acquired Vistawall, a leading
vertically-integrated manufacturer of architectural aluminium glazing systems
with 26 locations and sales in all 50 states.
Americas Distribution invested euro 213 million in four transactions during the
year. The largest of these was the purchase in November of Acoustical Materials
Services (AMS) a major independent interior products distributor with 21
locations in California, Nevada, Hawaii, Arizona and Baja California, Mexico .
Two single-branch acquisitions in April expanded our roofing and siding presence
in California, while September saw the purchase of a six-branch business in
Florida.
OUTLOOK
Europe: The outlook for Europe Materials in 2008 is good. While organic growth
is unlikely to be as strong as an outstanding 2007, due to expected declines
from high levels in Irish and Spanish construction, we expect that strong growth
in Poland and Ukraine and continuing satisfactory activity levels in Nordic and
Swiss markets will enable further good progress in 2008.
Following successful delivery by our Products and Distribution activities in the
main Eurozone economies over the past two years, ongoing margin improvement
through a combination of price recovery and cost reduction remains the key focus
and we look to further profit advances in 2008, despite a somewhat slower growth
backdrop.
Overall for Europe, organic growth remains well underpinned by a continuing
strong dynamic in central and eastern countries with moderate progress expected
in the broader Eurozone. These operations will further benefit in 2008 from the
euro 1 billion of acquisition activity undertaken in 2007.
Americas: US highway funding will increase further in 2008 and, with a
continuing favourable pricing environment, a sustained emphasis on operating
efficiency and benefits from a record 2006/07 development spend, we expect
another year of progress for our infrastructure-focussed Materials operations.
New US residential demand is forecast to decline further, residential RMI
activity is expected to remain close to 2007 levels and, following good momentum
in 2007, non-residential construction looks likely to moderate later in 2008.
Benefits from acquisitions, improvements made in 2007, and further targeted cost
reduction measures will mitigate the effects of an overall weaker market, and we
look to a slightly lower US$ outcome for our Products and Distribution
activities.
Although movements in the US dollar will have a translation impact, with our
balanced exposure and expected returns from the euro 1.2 billion of acquisitions
completed in 2007, we currently expect an increase in US$ operating profit from
our American operations in 2008.
Overall: While developments over recent months have added to economic
uncertainties, CRH is well positioned across its operations to deal with the
evolving market circumstances. Following record levels of acquisition activity
in 2006 and 2007, and with an ongoing strong pipeline of opportunities, we are
continuing to develop our Western European and North American businesses while
building on our growing platforms in emerging markets. With a relentless
emphasis on operational efficiency, and targeted cost reduction measures, we
remain focused on our twin goals - performance and growth - and on delivering a
sixteenth consecutive year of profit and earnings growth in 2008.
GROUP INCOME STATEMENT
For the year ended 31st December 2007
2007 2006
euro m euro m
Revenue 20,992 18,737
Cost of sales (14,715) (13,123)
Gross profit 6,277 5,614
Operating costs (4,191) (3,847)
Group operating profit 2,086 1,767
Profit on disposal of fixed assets 57 40
Profit before finance costs 2,143 1,807
Finance costs (473) (407)
Finance revenue 170 155
Group share of associates' profit after tax 64 47
Profit before tax 1,904 1,602
Income tax expense (466) (378)
Group profit for the financial year 1,438 1,224
Profit attributable to:
Equity holders of the Company 1,430 1,210
Minority interest 8 14
Group profit for the financial year 1,438 1,224
Earnings per Ordinary Share
Basic 262.7c 224.3c
Diluted 260.4c 222.4c
Cash earnings per Ordinary Share 404.9c 352.1c
GROUP BALANCE SHEET
As at 31st December 2007
2007 2006
ASSETS euro m euro m
Non-current assets
Property, plant and equipment 8,226 7,480
Intangible assets 3,692 2,966
Investments in associates 574 554
Other financial assets 78 97
Derivative financial instruments 124 74
Deferred income tax assets 336 489
Total non-current assets 13,030 11,660
Current assets
Inventories 2,226 2,036
Trade and other receivables 3,199 3,172
Derivative financial instruments 9 5
Liquid investments 318 370
Cash and cash equivalents 1,006 1,102
Total current assets 6,758 6,685
Total assets 19,788 18,345
EQUITY
Capital and reserves attributable to the Company's equity holders
Equity share capital 186 184
Preference share capital 1 1
Share premium account 2,420 2,318
Own shares (19) (14)
Other reserves 70 52
Foreign currency translation reserve (547) (137)
Retained income 5,843 4,659
7,954 7,063
Minority interest 66 41
Total equity 8,020 7,104
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 5,928 5,313
Derivative financial instruments 52 47
Deferred income tax liabilities 1,312 1,301
Trade and other payables 141 160
Retirement benefit obligations 95 262
Provisions for liabilities 248 320
Capital grants 11 10
Total non-current liabilities 7,787 7,413
Current liabilities
Trade and other payables 2,956 2,788
Current income tax liabilities 244 216
Interest-bearing loans and borrowings 570 645
Derivative financial instruments 70 38
Provisions for liabilities 141 141
Total current liabilities 3,981 3,828
Total liabilities 11,768 11,241
Total equity and liabilities 19,788 18,345
GROUP CASH FLOW STATEMENT
For the year ended 31st December 2007
2007 2006
Cash flows from operating activities euro m euro m
Profit before tax 1,904 1,602
Finance costs, net 303 252
Group share of associates' profit after tax (64) (47)
Profit on disposal of fixed assets (57) (40)
Group operating profit 2,086 1,767
Depreciation charge 739 664
Share-based payments 23 16
Amortisation of intangible assets 35 25
Amortisation of capital grants (3) (2)
Other non-cash movements (2) 10
Net movement on provisions (49) 11
Decrease/(increase) in working capital 261 (132)
Cash generated from operations 3,090 2,359
Interest paid (including finance leases) (352) (253)
Income taxes paid:
- Irish corporation tax (18) (20)
- Overseas corporation tax (370) (358)
Net cash inflow from operating activities 2,350 1,728
Cash flows from investing activities
Inflows
Proceeds from disposal of fixed assets 156 252
Interest received 64 46
Capital grants received 3 -
Dividends received from associates 30 22
253 320
Outflows
Purchase of property, plant and equipment (1,028) (832)
Acquisition of subsidiaries and joint ventures (1,858) (1,978)
Investments in and advances to associates - (7)
Advances to joint ventures and purchase of trade investments (40) (13)
Deferred and contingent acquisition consideration paid (107) (74)
(3,033) (2,904)
Net cash outflow from investing activities (2,780) (2,584)
Cash flows from financing activities
Inflows
Proceeds from issue of shares 36 87
Shares issued to minority interests - 3
Decrease in liquid investments 29 -
Increase in interest-bearing loans and borrowings 1,481 1,708
Increase in finance lease liabilities 2 3
1,548 1,801
Outflows
Ordinary Shares purchased (own shares), net (31) (15)
Iincrease in liquid investments - (35)
Repayment of interest-bearing loans and borrowings (753) (656)
Repayment of finance lease liabilities (27) (13)
Net cash movement in derivative financial instruments (113) (29)
Dividends paid to equity holders of the Company (250) (197)
Dividends paid to minority interests (5) (12)
(1,179) (957)
Net cash inflow from financing activities 369 844
Decrease in cash and cash equivalents (61) (12)
Cash and cash equivalents at beginning of year 1,102 1,149
Translation adjustment (35) (35)
Cash and cash equivalents at end of year 1,006 1,102
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31st December 2007
2007 2006
euro m euro m
Items of income and expense recognised directly within equity:
Currency translation effects (410) (371)
Actuarial gain on Group defined benefit pension obligations 159 155
Gains/(losses) relating to cash flow hedges 8 (2)
Tax on items recognised directly within equity (74) (15)
Net expense recognised directly within equity (317) (233)
Group profit for the financial year 1,438 1,224
Total recognised income and expense for the year 1,121 991
Equity holders of the company 1,116 980
Minority interest 5 11
Total recognised income and expense for the year 1,121 991
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31st December 2007
2007 2006
euro m euro m
Total equity at beginning of year 7,104 6,234
Issue of shares:
- Share option and participation schemes 36 87
- Issued in lieu of dividends 68 25
Ordinary Shares purchased (own shares), net (31) (15)
Share-based payments 23 16
Dividends (318) (222)
Movement in minority interest 25 2
Items of income/(expense) recognised directly within equity:
Currency translation effects (410) (371)
Actuarial gain on Group defined benefit pension obligations 159 155
Gains/(losses) relating to cash flow hedges 8 (2)
Tax on items recognised directly within equity (74) (15)
Profit for the year attributable to equity holders 1,430 1,210
Total equity at end of year 8,020 7,104
SUPPLEMENTARY INFORMATION
1 Basis of Preparation
The financial information presented in this report has been prepared in
accordance with the Group's accounting policies under International Financial
Reporting Standards as issued by the International Accounting Standards Board
(IASB)
2 Translation of Foreign Currencies
This financial information is presented in euro. Results and cash flows of
subsidiaries, joint ventures and associates based in non-euro countries have
been translated into euro at average exchange rates for the period, and the
related balance sheets have been translated at the rates of exchange ruling at
the balance sheet date. Adjustments arising on translation of the results of
non-euro subsidiaries, joint ventures and associates at average rates, and on
restatement of the opening net assets at closing rates, are dealt with in a
separate translation reserve within equity, net of differences on related
currency borrowings. All other translation differences are taken to the income
statement. Rates used for translation of results and balance sheets into euro
were as follows:
Average Year ended 31st December
euro 1 = 2007 2006 2007 2006
US Dollar 1.3705 1.2556 1.4721 1.3170
Pound Sterling 0.6843 0.6817 0.7334 0.6715
Polish Zloty 3.7837 3.8959 3.5935 3.8310
Ukrainian Hryvnia 6.8982 6.3290 7.3588 6.6583
Swiss Franc 1.6427 1.5729 1.6547 1.6069
Canadian Dollar 1.4678 1.4237 1.4449 1.5281
Argentine Peso 4.2718 3.8623 4.5948 4.0373
Israeli Shekel 5.6270 5.5928 5.6201 5.5623
3 Key Components of 2007 Performance
Analysis of Change
Total Acquisitions
euro million 2007 2006 Change Organic 2006 2007 Non-rec Exchange
Revenue 20,992 18,737 +2,255 +238 +1,636 +1,215 - -834
Operating profit 2,086 1,767 +319 +164 +121 +101 +12 -79
Profit on disposals 57 40 +17 +18 - - -1
Trading Profit 2,143 1,807 +336 +182 +121 +101 +12 -80
Finance costs, net -303 -252 -51 +42 -64 -42 - +13
Associates 64 47 +17 +16 +1 - - -
Profit before tax 1,904 1,602 +302 +240 +58 +59 +12 -67
PBT % change v. 2006 +19% +15% +4% +4% +1% -5%
4 Analysis of Revenue, EBITDA and Operating Profit by Business
2007 2006
euro m % euro m %
Revenue
Europe Materials 3,651 17.4 2,967 15.8
Europe Products 3,628 17.3 3,186 17.0
Europe Distribution 3,435 16.4 2,786 14.9
Americas Materials 5,445 25.9 4,778 25.5
Americas Products 3,510 16.7 3,572 19.1
Americas Distribution 1,323 6.3 1,448 7.7
20,992 100.0 18,737 100.0
EBITDA *
Europe Materials 746 26.1 564 23.0
Europe Products ** 461 16.1 361 14.7
Europe Distribution ** 261 9.1 210 8.5
Americas Materials 834 29.2 695 28.3
Americas Products 468 16.4 506 20.6
Americas Distribution 90 3.1 120 4.9
2,860 100.0 2,456 100.0
Depreciation charge
Europe Materials 159 143
Europe Products 145 134
Europe Distribution 46 37
Americas Materials 263 220
Americas Products 112 116
Americas Distribution 14 14
739 664
Amortisation of intangible assets
Europe Materials 1 -
Europe Products 8 6
Europe Distribution 3 1
Americas Materials 1 -
Americas Products 16 15
Americas Distribution 6 3
35 25
Operating profit
Europe Materials 586 28.1 421 23.8
Europe Products ** 308 14.8 221 12.5
Europe Distribution ** 212 10.2 172 9.7
Americas Materials 570 27.3 475 26.9
Americas Products 340 16.3 375 21.2
Americas Distribution 70 3.3 103 5.9
2,086 100.0 1,767 100.0
Profit on disposal of fixed assets
Europe Materials 29 28
Europe Products 11 2
Europe Distribution 3 4
Americas Materials 11 2
Americas Products 2 3
Americas Distribution 1 1
57 40
*EBITDA excludes profit on disposal of fixed assets and comprises group
operating profit (earnings) before interest, tax, depreciation and amortisation.
** 2006 segment results for Europe Products included a goodwill impairment
loss of euro 50 million relating to the Cementbouw BV joint venture in the
Netherlands, and euro 19 millon of a total gain of euro 38 million arising on
deconsolidation of certain pension schemes in the Netherlands. The remaining
euro 18 million of the gain was included in the segment profit for Europe
Distribution.
5 Geographical Analysis of Revenue and Operating Profit
2007 2006
euro m % euro m %
Revenue
Ireland * 1,402 6.7 1,251 6.7
Benelux 2,918 13.9 2,628 14.0
Rest of Europe 6,382 30.4 5,058 27.0
Americas 10,290 49.0 9,800 52.3
20,992 100.0 18,737 100.0
EBITDA**
Ireland * 207 7.2 209 8.5
Benelux *** 354 12.4 301 12.3
Rest of Europe 905 31.6 624 25.4
Americas 1,394 48.8 1,322 53.8
2,860 100.0 2,456 100.0
Depreciation charge
Ireland * 48 52
Benelux 82 81
Rest of Europe 220 181
Americas 389 350
739 664
Amortisation of intangible assets
Ireland * - -
Benelux 2 2
Rest of Europe 10 5
Americas 23 18
35 25
Operating profit
Ireland * 159 7.6 157 8.9
Benelux *** 270 12.9 218 12.3
Rest of Europe 675 32.4 438 24.8
Americas 982 47.1 954 54.0
2,086 100.0 1,767 100.0
Profit on disposal of fixed assets
Ireland * 26 23
Benelux 7 3
Rest of Europe 9 8
Americas 15 6
57 40
*Total island of Ireland
**EBITDA excludes profit on disposal of fixed assets and comprises group
operating profit (earnings) before interest, tax, depreciation and amortisation.
***2006 segment results for Benelux included a goodwill impairment loss of euro
50 million relating to the Cementbouw BV joint venture in the Netherlands , and
a gain of euro 38 million arising on deconsolidation of certain pension schemes
in the Netherlands .
6 Proportionate Consolidation of Joint Ventures
2007 2006
Group share of: euro m euro m
Revenue 1,076 901
Cost of sales (734) (628)
Gross profit 342 273
Operating costs (229) (180)
Impairment of Cementbouw bv goodwill - (50)
Operating profit 113 43
Profit on disposal of fixed assets - 4
Profit before finance costs 113 47
Finance costs (net) (14) (16)
Profit before tax 99 31
Income tax expense (25) (18)
Group profit for the financial year 74 13
Depreciation 43 37
7 Earnings per Ordinary Share
The computation of basic, diluted and cash earnings per share is set out below:
2007 2006
euro m euro m
Profit attributable to equity holders of the Company 1,430 1,210
Preference dividends paid - -
Numerator for basic and diluted earnings per Ordinary Share 1,430 1,210
Amortisation of intangibles 35 25
Depreciation charge 739 664
Numerator for cash earnings per Ordinary Share 2,204 1,899
Number of Number of
Denominator for basic earnings per Ordinary Share Shares Shares
Weighted average number of shares (millions) in issue 544.3 539.4
Effect of dilutive potential shares (share options) 4.8 4.7
Denominator for diluted earnings per Ordinary Share 549.1 544.1
Earnings per Ordinary Share euro cent euro cent
- basic 262.7 224.3
- diluted 260.4 222.4
Cash earnings per Ordinary Share (i) 404.9 352.1
(i) Cash earnings per share, a non-GAAP financial measure, is presented here
for information as management believes it is a useful financial indicator of a
company's ability to generate cash from operations.
8 Net Debt and Finance Costs
2007 2006
Net debt euro m euro m
Non-current assets
Derivative financial instruments 124 74
Current assets
Derivative financial instruments 9 5
Liquid investments 318 370
Cash and cash equivalents 1,006 1,102
Non-current liabilities
Interest-bearing loans and borrowings (5,928) (5,313)
Derivative financial instruments (52) (47)
Current liabilities
Interest-bearing loans and borrowings (570) (645)
Derivative financial instruments (70) (38)
Total net debt (5,163) (4,492)
Including Group share of joint ventures' net debt (164) (248)
Finance costs (net)
Net Group finance costs on interest-bearing cash and cash
equivalents, loans and borrowings
292 234
Net pensions financing credit (15) (12)
Charge to unwind discount on provisions/deferred consideration 22 27
Net charge re change in fair value of derivatives 4 3
Total net finance costs 303 252
Including Group share of joint ventures' net finance costs 14 16
9 Summarised Cash Flow
The table below summarises the Group's cash flows for the years ended 31st
December 2007 and 31st December 2006.
2007 2006
Inflows euro m euro m
Profit before tax 1,904 1,602
Depreciation 739 664
Working capital movements 227 (76)
Amortisation of intangibles 35 25
Proceeds from disposal of fixed assets 156 252
Share issues 104 112
3,165 2,579
Outflows
Capital expenditure 1,028 832
Acquisitions and investments 2,227 2,311
Dividends 318 222
Ordinary Shares purchased (own shares), net 31 15
Tax paid 388 378
Other 81 51
4,073 3,809
Net outflow (908) (1,230)
Translation adjustment 237 187
Increase in net debt (671) (1,043)
10 Other
2007 2006
EBITDA interest cover (times) 9.4 9.7
EBIT interest cover (times) 6.9 7.0
EBITDA = earnings before interest, tax, depreciation and amortisation, excluding profits on disposal
EBIT = earnings before interest and tax, excluding profits on disposal
Average shares in issue 544.3m 539.4m
Net dividend per share (euro cent) 68c 52c
Dividend cover (Earnings per share/Dividend per share) 3.9x 4.3x
Depreciation charge - subsidiaries (euro m) 696 627
Depreciation charge - share of joint ventures (euro m) 43 37
Amortisation of intangibles - subsidiaries (euro m) 35 25
Amortisation of intangibles - share of joint ventures (euro m) - -
Share-based payment expense (euro m) 23 16
Income tax expense - Irish tax (euro m) 13 18
Income tax expense - overseas tax (euro m) 413 310
Income tax expense - deferred tax (euro m) 40 50
Market capitalisation at year-end (euro m) 13,051 17,120
Total equity at year-end (euro m) 8,020 7,104
Net debt (euro m) 5,163 4,492
Net debt as a percentage of total equity 64% 63%
Net debt as a percentage of market capitalisation 40% 26%
11 Statutory Accounts
The financial information presented in this report does not represent full
statutory accounts. Full statutory accounts for the year ended 31st December
2007 prepared in accordance with IFRS, upon which the Auditors have given an
unqualified audit report, have not yet been filed with the Registrar of
Companies. Full accounts for the year ended 31st December 2006, prepared in
accordance with IFRS and containing an unqualified audit report, have been
delivered to the Registrar of Companies.
12 Board Approval
This results announcement was approved by the Board of Directors of CRH plc on
3rd March 2008.
13 Annual Report post-out and Annual General Meeting (AGM)
The 2007 Annual Report is expected to be posted to shareholders on Wednesday,
2nd April 2008 together with details of the Scrip Dividend Offer in respect of
the final 2007 dividend. The 2007 Annual Report will be available to the public
from Thursday 3rd April 2008 at the Company's registered office. The Company's
AGM is scheduled to be held in the Royal Marine Hotel, Dun Laoghaire, Dublin at
11 am on Wednesday, 7th May 2008.
This information is provided by RNS
The company news service from the London Stock Exchange